The articles are your corporation’s constituting act: name, share capital, number of directors, restrictions on activities and on the transfer of shares. Amending them requires resolutions and the filing of articles of amendment. Many changes people believe belong to the articles in fact belong to the by-laws or the shareholders’ agreement, which are amended far more simply.
“We have to amend the articles” is a sentence one hears often and which is wrong half the time. Before starting the procedure and incurring its costs, it is worth knowing what the articles actually contain, and what is settled elsewhere.
What the articles contain
The articles are the document filed with the authority to create the corporation. They set the corporate name, the description of the share capital with the classes of shares and their rights, the number of directors or the permitted range, the location of the head office in broad terms, and where applicable the restrictions imposed on the corporation’s activities or on the transfer of its shares.
It is a short document, public, and deliberately stable. Everything touching the corporation’s day-to-day life, the powers of the officers, how meetings are called, the bank signing authority, is found elsewhere.
Articles, by-laws or shareholders’ agreement
Here is the distinction that will save you the most.
| Statuts | By-laws | Shareholder agreement | |
|---|---|---|---|
| What it governs | Existence and share capital | Internal operation | Relations among the partners |
| Public | Yes | No | No |
| To amend it | Resolutions and filing of articles of amendment | A decision of the directors, often ratified | Agreement of the parties |
| Government fees | Yes | Aucun | Aucun |
| Exemples | Name, classes of shares, restrictions | Calling of meetings, signatories, powers of officers | Transfers, departures, deadlocks |
Have the change characterized before starting a procedure to amend the articles.
The most frequent amendments
A change of corporate name comes first. It is a full amendment to the articles, with a prior search of the new name; our article on changing a corporation’s name describes the full procedure and the list of what must be updated afterward.
Restructuring the share capital comes next, and it is the most technical. Creating a class of non-voting shares to bring in a passive investor, adding preferred shares as part of a reorganization, or adjusting the rights attached to an existing class: all of that goes through the articles. It is also the place where a mistake costs the most, because it is discovered at the moment of a transaction.
The number of directors is amended when the range provided no longer matches reality. Take care not to confuse this with the simple change of person, which does not touch the articles.
The restrictions, finally: those limiting the corporation’s activities or framing the transfer of its shares. Professionals governed by an order know how much they matter, as our article onprofessional incorporation.
The required authorizations
Amending the articles is not an administrative decision: it touches the corporation’s foundational bargain and requires shareholder approval, by a heightened majority in many cases. Where the amendment affects the rights of one class of shares in particular, the holders of that class may have to vote separately.
These requirements exist to protect minority holders, and they are why an amendment must be documented with care. The résolutions authorizing it are part of the file just as much as the certificate issued afterward, and the whole joins the minute book.
When the amendment is part of a reorganization
Some amendments to the articles are not isolated acts but one piece of a larger transaction, and that is where the order of things needs attention.
The arrival of an investor is the most common example: a new class of shares is created to bring them in, the voting rights are adjusted, and an agreement is signed framing their participation. Rearranging family ownership is another: the present value is frozen in one class of shares and new participating shares are issued, often in favour of a holding corporation or of the next generation.
In these situations, amending the articles is never the first step. It comes after the tax decision, taken with your accountant or tax specialist, which determines which classes to create and with what attributes. Filing articles before you have that answer means risking having to file them again, with new fees.
The mistakes found too late
Three come up regularly in the files we take over.
Share capital that is too bare. A corporation constituted with a single class of common shares suits the sole founder, until the day they want to bring in a partner without giving them a vote, or pay dividends at different rates. Amendment is then required, whereas a share capital well designed at the outset would have allowed everything at no additional cost.
Forgotten restrictions. A restriction on the transfer of shares, common in closely held corporations, produces effects few people check before selling. A restriction on activities, for its part, can end up contradicting what the business actually does years later.
An amendment never reflected internally. The articles are amended, the certificate is issued, and the securities register goes on showing the old structure. The share certificates are not reissued. It is the kind of inconsistency due diligence brings to light immediately, and which makes a buyer doubt the rest of the file.
What an amendment does not settle
Amending the articles changes neither the identity nor the obligations of the corporation. Its debts follow it, its contracts remain valid, its business number stays. It is the same principle as for a change of name: you adjust the frame, not the history.
And an amendment is no substitute for a shareholder agreement. Creating a class of shares for a new partner without providing for what happens if they leave, die or stop working is doing half the job. The articles say what the shares are worth; the agreement says what happens when the relationship changes.
Finally, if your aim is to change the constituting statute rather than the content of your articles, what you want is prorogation , not an amendment.
Frequently asked questions
When do the articles of a corporation have to be amended?
To change the corporate name, restructure the share capital, adjust the number of directors provided for, or modify the restrictions on activities and on the transfer of shares. Many other changes in fact belong to the by-laws or the shareholders’ agreement.
What is the difference between the articles, the by-laws and the shareholders’ agreement?
The articles govern existence and share capital, they are public and are amended by a filing with fees. The by-laws govern internal operation and are amended by a decision of the directors. The agreement governs relations among the partners and is amended by agreement of the parties.
Who must approve an amendment to the articles?
The shareholders, by a heightened majority in many cases. Where the amendment affects the rights of one class of shares in particular, the holders of that class may have to vote separately.
The current government amounts are set out in the fee for articles of amendment.